SINGAPORE/DUBAI: Dubai's Emaar Properties plans to sell its stake in RSH Holdings, a Singapore retailer valued at $164 million, two sources said on Wednesday, as it looks to boost cash and shed non-core assets.
Emaar, which had a 30 percent stake in RSH through a joint venture with India's MGF Group, had to increase its effective stake to 61.3 percent in the retailer after it took control of the debt owed by the joint venture firm. The move came after the joint venture firm had defaulted on a loan.
One of the sources told Reuters the sale is happening because the two partners do not want to pursue the retail business. Emaar has hired DBS to advise it, a second source said.
Both sources with direct knowledge of the matter declined to be identified as the talks are private.
"The competitive advantage of Emaar's retail operations, is the access to the company's developments and thus real estate in prime locations," says Roy Cherry, SHUAA Capital vice-president for research.
"Emaar retail doesn't need to own retail companies, its focus should be on partnerships within Emaar malls ... this is a positive re-allocation of assets. Emaar would be exiting a non-core investment and boosting its cash buffer," Cherry said.
Emaar, 31.2 percent owned by the Dubai government, is the Arab world's largest listed developer, but is less indebted than other Dubai property firms, with about 8.1 billion dirhams ($2.21 billion) of loans and borrowings outstanding as of September 2009 of which about half are due this year.
Shares of Emaar were down 1.53 percent at 0849 GMT.
Emaar and DBS spokeswomen declined to comment, while RSH could not immediately be reached.
Emaar had offered S$0.77 ($0.544) a share last year when it launched a mandatory takeover offer for the shares it did not own following its decision to buy the debt. Standard Chartered advised Emaar on the deal.
RSH shares are down 17 percent from Emaar's mandatory offer price. In 2007, the joint venture firm had paid S$1.05 a share to take a controlling stake in RSH.
RSH, whose shares are suspended, last traded at S$0.66 a share on Jan. 28.
Emaar, developer of the world's tallest tower and one of world's biggest shopping malls, is turning to projects in India, Egypt and Saudi Arabia primarily as it looks to boost revenue in the future, executives said in January.
The firm posted a 53 percent rise in third-quarter net profit to 655 million dirhams, beating most analysts' forecasts, on higher sales of its high-end properties.
An average of analysts polled by Reuters in January forecast a profit of 761 million dirhams in the fourth quarter for Emaar.
Its performance contrasts with that of troubled rival Nakheel which has seen earnings collapse and its liabilities rise to $20 billion.
Nakheel's parent company Dubai World shook global markets in November after requesting a standstill on $26 billion of debt.
